Bitcoin’s bull market is back.
Which presents a pretty nice problem to have:
You own Bitcoin.
You want to keep owning Bitcoin.
But you also need cash.
Maybe you’re renovating the house. Starting a business. Or you just want some dry powder sitting around.
Normally, getting that cash means selling some BTC.
But who would ever sell their Bitcoin? Especially these days. 😉
There’s another option: borrow against it.
Bitcoin-backed loans let you put up BTC as collateral and borrow dollars against it. You get liquidity today while keeping exposure to the Bitcoin you pledged.
But picking a Bitcoin loan requires more work than asking Chat or Claude which lender has the lowest APR.
Because borrowing against your Bitcoin can be an incredibly useful tool. But when you’re investing in digital assets, you play defense first.
You can’t just go and do it without understanding the interest rates, the liquidation price, the fees, and most importantly: where your Bitcoin goes after you hand it over.
That means knowing exactly what you’re signing up for when you pick a Bitcoin loan.
Bitcoin loans in 30 seconds
For this article, we partnered with Ledn, one of our favorite partners at Milk Road, to break down what you should actually look for before borrowing against your Bitcoin.
Let’s say you take out a $500 Bitcoin-backed loan at 11.49% APR.
Your loan is backed by 0.01393 BTC, worth approximately $1,034 when Bitcoin is trading at $74,253.
With an outstanding balance of $582.52, including accrued interest, your LTV is 56.41%.
LTV = loan-to-value. It’s simply the size of your outstanding loan compared to the value of the Bitcoin backing it.
If Bitcoin goes up, your collateral becomes more valuable and your LTV falls.
If Bitcoin drops, your collateral loses value, pushing your LTV higher.
With these loan figures, BTC falling to $59,740 would push LTV to 70%. At $52,272, LTV would reach 80%, triggering partial liquidation.
That's a roughly 29% Bitcoin drop from $74,253 before reaching that liquidation threshold.
Ledn can issue warnings as the loan approaches liquidation. At 80% LTV or higher, liquidation is triggered automatically. Enough collateral is sold to cover the required amount of the outstanding loan and interest, and a 0.50% trade spread applies. Remaining collateral is returned to the borrower.
Once liquidation begins, it can’t be reversed.
But what does someone actually use one of these loans for? Let’s take a look at a real-life use case from a small business owner.
Two new work vehicles. Zero Bitcoin sold.
Napoleón Osorio runs BitDriver, a Bitcoin-friendly transportation company in El Salvador.
His business needed two more vehicles, but he didn’t want to sell the Bitcoin he’d been accumulating since 2021 (again, who would).
A traditional bank loan wasn’t really an option. His business didn’t meet the bank’s operating-history requirement, and he says the approval process would have taken 20-25 days anyway.
So he borrowed against his Bitcoin through Ledn instead.
The loan was funded in less than three hours. BitDriver used the money to help purchase two vehicles and repaid the loan the following month.
That’s basically the use case in a nutshell:
You have an asset you don’t want to sell. You need capital for something else. So you borrow against the asset instead.
Now before we get too excited, it’s important to understand these loans. Let’s start with the rates.
A lower rate can come with higher risk
Ask ChatGPT for the best Bitcoin loan rate and you’ll probably get a bunch of numbers.
11.49%. 10.99%. 10.19%.
Naturally, your eyes go straight to the lowest one.
Imagine two hypothetical loans:
Loan A: 10.99% APR.
Loan B: 11.49% APR.
Loan A looks cheaper, right?
But suppose Loan A charges additional fees, gives you less room before liquidation, or allows your collateral to be reused in ways that expose it to additional counterparties.
That half a percentage point can suddenly look a lot less important.
So before moving a single satoshi, there are a few things we’d check.
1. Start with the actual rate
APR is the easiest part to compare.
Ledn uses tiered pricing, so larger loans currently receive lower advertised rates:
Ledn rates shown as of October 23rd, 2026. Rates and availability vary by jurisdiction. Check Ledn for current terms before borrowing.
So someone borrowing $2 million currently gets a lower advertised rate than someone borrowing $10,000.
But APR alone doesn’t tell you what the loan will cost.
A 2% administration fee applies where applicable and is already included in the advertised APR. That fee currently doesn’t apply to clients in Canada or the United States.
Interest accrues daily, standard loans generally run for 12 months, and there’s no penalty for repaying early.
2. Know what happens if Bitcoin dumps
A 56.41% LTV might feel pretty comfortable when Bitcoin is going up.
But as we all know, BTC occasionally has other plans.
At $74,253 per BTC, the loan's LTV is 56.41%. If Bitcoin falls to $59,740, it reaches 70% LTV.
Thankfully, there are a few ways to bring that number back down.
With Ledn, you can add more BTC as collateral or repay part of your loan. Eligible borrowers can also enable Auto Top-Up, which transfers available BTC from the Transaction Account to collateral at 70% LTV, aiming to bring it back to 68%.
For example, a transfer of 0.00086 BTC, worth $63.85 at the time, would bring a loan from 70% back to 68% LTV.
That’s particularly useful when Bitcoin decides to dump while you’re asleep.
But there’s an important catch.
Auto Top-Up needs sufficient BTC in the Transaction Account. Any additional BTC sent onchain also needs confirmation before it changes your LTV.
If Bitcoin falls to around $55,765, the loan would be at roughly 75.08% LTV. From there, another 6% drop could push it to partial liquidation near $52,280.
And once a loan reaches 80% LTV, liquidation happens automatically and can’t be reversed.
So before taking out any Bitcoin-backed loan, understand exactly how much room you have before liquidation, what warnings you’ll receive, and what options you have to bring your LTV back down.
3. Estimate the loan
Let’s go back to the $500 loan at 11.49% APR.
With Bitcoin at $74,253, 0.01393 BTC is worth approximately $1,034, supporting an outstanding loan balance of $582.52.
At 56.41% LTV, there’s some room for Bitcoin to fall. But exactly how much?
If BTC drops to $59,740, LTV reaches 70%, the Auto Top-Up threshold for eligible accounts with the feature enabled.
If BTC falls further to about $52,272, LTV reaches 80%, where partial liquidation begins.
Now flip that around. If BTC rises to $139,394, the loan's LTV falls toward 30%, assuming the loan balance stays unchanged.
The amount borrowed hasn't changed, but the safety margin has.
And keep in mind that interest accrues daily. A growing loan balance can push LTV higher even if the Bitcoin price stays flat.
So it's wise to start with the amount of cash you actually need, then work backward into the amount of BTC required to support it.
4. Where does your Bitcoin ACTUALLY go?
For many, this is the only thing that matters for borrowing against your Bitcoin.
You’ve spent years stacking… and now you’re sending it somewhere else so they can lend you money.
So who holds your Bitcoin while the loan is open, and what are they allowed to do with it?
This is where you’ll run into an unfamiliar word when comparing lenders:
Rehypothecation.
Strange word. Important concept.
Different Bitcoin lenders may handle loan collateral differently, which can affect the risks you take on.
With Ledn's Custodied Loans, your Bitcoin remains in custody for the life of the loan. But that doesn’t necessarily mean the collateral remains untouched.
As part of the loan funding structure, collateral may be re-posted to an institutional funding partner, such as a bank or credit fund, or to a Ledn-sponsored financing vehicle. This arrangement can be used as part of the financing that funds the loan.
Depending on the applicable funding structure, collateral is subject to contractual and legal arrangements intended to separate it from certain assets of the relevant funding counterparty or may be held through a bankruptcy-remote financing vehicle. These arrangements do not eliminate all risks, including counterparty, custody and insolvency-related risks.
TL;DR: Your BTC may be used as collateral in the financing of your loan, but it is not lent out to generate interest. Using collateral in a financing arrangement involves risks, including risks relating to counterparties and insolvency.
For additional information about Ledn’s operations and loan book, Ledn publishes an Open Book Report containing third-party-reported metrics.
Ledn’s most recent report from August 31, 2026 included:
- 100% of BTC collateral in custody.
- $757M in outstanding loans.
- 20,000+ BTC posted as collateral.
- 46% average LTV across the loan book.
After everything crypto lenders taught us in 2022, “Where exactly is my Bitcoin?” deserves a better answer than “trust us.”
And Ledn is making it easy to track your assets.
Enough talk. Let’s get liquid.
The bull market is back, and if you’re like us, you probably think Bitcoin still has a long way to run.
Maybe you plan to hold for another five years. Maybe ten. Maybe you’re never selling the damn thing.
But that doesn’t mean all that capital has to sit there untouched.
A Bitcoin-backed loan lets you access liquidity without giving up your Bitcoin exposure. That could mean renovating the house, investing in your business, jumping on another opportunity, or just having some extra dry powder when you need it.
That’s a pretty powerful tool. You just have to use it responsibly.
Know what you’re paying. Know how much room you have before liquidation. And know exactly what happens to your Bitcoin while the loan is open.
If you’re ready to see what borrowing against your Bitcoin could look like, you can run the numbers with Ledn. Enter how much you want to borrow, see your current rate and how much BTC you’d need to put up, and decide if it makes sense for you.
Sponsored by Ledn. This article is for informational purposes only. Bitcoin-backed loans involve interest, counterparty risk and the possibility of collateral liquidation. Rates, terms and availability vary by jurisdiction.
